United States - The New Paradigm (2025)

Before examining the new regulatory paradigm, we must be precise about what the SEC v. Ripple case actually resolved. Misunderstanding the ruling is common—and costly.

What Judge Torres Held (July 2023):

The ruling distinguished between different types of XRP sales:

TORRES RULING: XRP SALES CLASSIFICATION

- WERE investment contracts (securities)
- Buyers had contracts with Ripple
- Expected profits from Ripple's efforts
- Required registration (which didn't happen)
- Ripple violated securities laws here

- Were NOT investment contracts
- No contract between Ripple and buyers
- Buyers didn't know if Ripple was selling
- No "reasonable expectation" from Ripple's efforts
- Secondary market = not securities offering

- Were NOT investment contracts
- No "investment of money" element
- Recipients received XRP as compensation
- Different analysis applies

**Critical nuance:** The ruling addressed Ripple's *sales* of XRP, not XRP itself. Judge Torres didn't declare "XRP is not a security"—she held that programmatic sales on exchanges didn't constitute securities offerings under these circumstances.

The case concluded through a combination of the Torres ruling, the remedies order, and the effective abandonment of appeals:

The settlement resolved Ripple's specific liability but didn't create comprehensive clarity:

Still Open Questions:

1. Is XRP a security in other contexts?

2. What about new institutional sales?

3. How do ETFs fit in?

4. What happens if political winds shift?

On January 23, 2025, President Trump signed Executive Order 14178, "Strengthening American Leadership in Digital Financial Technology." This order established the policy framework for the administration's crypto approach.

Key Elements:

EXECUTIVE ORDER ON DIGITAL FINANCIAL TECHNOLOGY

- Support "responsible growth and use of digital assets"
- Maintain US leadership in blockchain technology
- Provide regulatory clarity for the industry
- Protect access to banking services

- Chaired by David Sacks ("Crypto and AI Czar")
- Members: SEC Chair, CFTC Chair, Treasury Secretary,
- Mandate: Develop comprehensive regulatory framework
- 180-day report deadline (delivered July 2025)

- Restrict CBDC development by federal agencies
- Promote US dollar-backed stablecoins
- Review and rescind conflicting prior guidance
- Ensure banking access for crypto companies
- Evaluate national digital asset stockpile

The PWG Report (July 2025):

• Clear jurisdictional boundaries between SEC and CFTC
• CFTC authority over spot crypto commodity markets
• SEC authority over crypto securities
• Framework for determining which category applies
• Support for stablecoin legislation (which became GENIUS Act)
• International coordination on standards

The administration's appointments signaled dramatic philosophical shift:

• Former SEC Commissioner (2002-2008)

• Known for deregulatory philosophy

• Criticized Gensler's enforcement approach

• Appointed January 2025, confirmed April 2025

• Immediately established Project Crypto

• Venture capitalist (Craft Ventures)

• PayPal mafia member

• Chairs President's Working Group

• No regulatory authority but significant influence

• Coordinates inter-agency crypto policy

• CFTC Commissioner since 2022

• Strong crypto expertise

• Launched "Crypto Sprint" initiative

• Advocates CFTC spot market authority

• Former SEC Crypto Task Force counsel

• Extensive crypto industry client experience

• Nominated October 2025

• Confirmation pending as of November 2025

• Confirmed January 2025

• Supportive of crypto innovation

• Contrast with prior Treasury skepticism

• Key voice on stablecoin policy

The change wasn't just personnel—it was philosophy:

Gensler Era (2021-2025):

Approach: "Regulation by enforcement"
Theory: Most crypto tokens are securities
Method: Sue first, clarify rules later
Result: 100+ enforcement actions
        No comprehensive rulemaking
        Industry uncertainty
        Innovation moved offshore

Atkins Era (2025-present):

Approach: "Regulation by rulemaking"
Theory: Crypto needs tailored frameworks
Method: Engage industry, write rules, then enforce
Result: Project Crypto launched
        Multiple consultation processes
        Industry re-engaging
        US positioning as crypto hub

• Dropped or settled multiple Gensler-era cases
• Issued guidance on registration pathways
• Approved XRP and other crypto ETFs
• Engaged constructively with industry
• Coordinated with CFTC rather than competing

Within days of the new administration, the SEC announced a reconstituted Crypto Task Force led by Commissioner Hester Peirce ("Crypto Mom"):

On July 31, 2025, Chair Atkins delivered a major policy speech announcing "Project Crypto"—the SEC's comprehensive initiative to modernize crypto regulation.

Project Crypto Components:

PROJECT CRYPTO FRAMEWORK

1. Registration Pathways:

1. Trading Platform Framework:

1. Token Classification:

1. Coordination with CFTC:

1. International Alignment:

Public Comment Process:

• Registration frameworks (comments due August 2025)
• Trading platform rules (comments due September 2025)
• Token classification guidance (ongoing)

One of the most concrete changes: crypto ETF approvals accelerated dramatically.

XRP ETF Specifics:

• Multiple issuers (Grayscale, others)
• Spot exposure to XRP
• Regulated, accessible to retail investors
• Custody through qualified custodians
• Daily disclosure of holdings

What ETF Approval Implies:

• SEC comfortable with XRP as underlying asset
• Not treating XRP as security requiring registration
• Institutional-grade custody available
• Mainstream investment product status

Even with Project Crypto underway, significant questions remain:

• SEC issued framework guidance but not bright-line rules

• "Facts and circumstances" analysis still applies

• Safe harbors exist but are narrow

• Project Crypto acknowledges DeFi complexity

• "Sufficiently decentralized" concept referenced

• No comprehensive DeFi framework yet

• Front-end operators may face requirements

• Income? Securities? Something else?

• No definitive guidance yet

• Consultation ongoing

Coordinating with the SEC's Project Crypto, the CFTC launched its "Crypto Sprint" under Acting Chair Caroline Pham in August 2025.

Crypto Sprint Objectives:

CFTC CRYPTO SPRINT

- Implement PWG Report recommendations
- Remove outdated advisories
- Streamline derivatives registration
- Enhance market surveillance

- Spot crypto trading on DCMs
- Tokenized asset frameworks
- DeFi and smart contract oversight
- Cross-border coordination

- Joint framework development
- Jurisdictional boundary clarity
- Information sharing protocols

The biggest open question for CFTC: Will it gain authority over spot crypto commodity markets?

Proposed Expansion (CLARITY Act):

• Would give CFTC registration authority over spot crypto exchanges

• Applies to "digital commodities" (non-securities)

• Creates CFTC licensing framework

• Establishes customer protection requirements

• Senate considering similar legislation

• Not yet passed as of November 2025

• Expected to advance in 2026

• Industry strongly supportive

Implications for XRP:

• CFTC becomes primary regulator
• Registration framework applies to XRP exchanges
• Clear (non-security) status formalized
• Potential for XRP futures/derivatives expansion

Unlike the Gensler era's turf battles, the current SEC and CFTC are coordinating:

Jurisdictional Division (Emerging):

EMERGING SEC/CFTC JURISDICTION

- Crypto securities (tokens meeting Howey)
- Security tokens (tokenized securities)
- Investment contracts
- Securities exchanges listing crypto

- Crypto commodities (BTC, likely ETH, potentially XRP)
- Derivatives on all crypto assets
- Spot exchanges (if legislation passes)
- Commodity fraud/manipulation

- Stablecoins (Treasury lead, SEC/CFTC support)
- DeFi (unclear, joint approach needed)
- Cross-border issues

---

Stablecoins represent the clearest use case for crypto in traditional finance. They also present the clearest regulatory questions about money, payments, and financial stability. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) creates the first comprehensive federal framework.

Signed into law July 2025, the GENIUS Act establishes:

Dual Regulatory Structure:

GENIUS ACT FRAMEWORK

- For stablecoins above threshold ($10B+)
- National bank or Fed member charter
- Federal Reserve oversight
- Strictest requirements

- For stablecoins below threshold
- State money transmitter or trust company
- State-level supervision
- Must meet federal minimums

- 100% reserve backing
- Permissible assets: Cash, T-bills, repos
- Regular attestations
- Redemption rights (1:1 at par)
- Disclosure requirements

Key Provisions:

1. Reserve Requirements:

2. Redemption Rights:

3. Issuer Requirements:

4. Prohibited Activities:

Ripple's RLUSD stablecoin launched in December 2024 under NYDFS regulation. The GENIUS Act creates additional considerations:

Competitive Positioning:

STABLECOIN COMPETITIVE LANDSCAPE (POST-GENIUS)

Stablecoin | Issuer     | Regulator        | Status
-----------|------------|------------------|--------
USDT       | Tether     | Uncertain*       | Dominant but questions
USDC       | Circle     | State (NY, etc.) | Well-positioned
RLUSD      | Ripple     | NYDFS            | Emerging competitor
PYUSD      | PayPal     | NYDFS            | Growing
GUSD       | Gemini     | NYDFS            | Established

*Tether's reserve composition and regulatory status 
remain subject to debate

What Would Be Bearish:

• Legislative stall on CLARITY Act
• Court challenges to ETF approvals
• New enforcement actions against XRP-related entities
• Reversal of SEC crypto-friendly stance
• Political backlash against crypto industry

Red Flags to Watch:

• Congressional crypto hearings turning hostile
• SEC Commissioner statements suggesting reversal
• Treasury concerns about stablecoin risks
• Banking regulator restrictions on crypto
• Major fraud cases generating political pressure

How to incorporate US regulatory developments:

US REGULATORY DECISION FRAMEWORK

Bullish Catalysts:
→ CLARITY Act passage: Increase position
→ Additional ETF approvals: Hold/accumulate
→ Clear CFTC XRP classification: Strong bullish
→ Major bank XRP adoption: Very bullish

Neutral Events:
→ Continued consultation without action: Hold
→ Minor regulatory clarifications: Hold
→ Personnel changes (within current philosophy): Monitor

Bearish Catalysts:
→ Legislative failure: Reduce exposure
→ New enforcement theory: Significant concern
→ Banking access restrictions: Major red flag
→ Political shift against crypto: Reassess thesis

The US regulatory environment for XRP improved dramatically in 2025. The existential threat is gone. ETFs trade. Major exchanges list XRP. Institutions can participate. This is genuinely better.

But "better" isn't "resolved." The framework is still being built. The political winds that shifted toward crypto could shift again. The SEC hasn't formally declared XRP a non-security—it's simply stopped fighting about it. Ongoing vigilance remains appropriate.

For investment sizing: US regulatory risk has decreased from "thesis-threatening" to "meaningful factor among several." That's real progress worth recognizing—and worth not overstating.

Assignment: Create a one-page "US Regulatory Status Dashboard" for XRP that an investor could reference to quickly understand current status and key monitoring items.

Requirements:

Part 1: Current Status Summary (200-250 words)

• XRP classification status (with nuance from Torres ruling)
• Exchange availability
• ETF status
• Institutional access level
• Key regulatory relationships (SEC, CFTC)

Rate overall regulatory status: Green (clear) / Yellow (improving) / Red (problematic)

Part 2: Key Metrics to Track (150-200 words)

• What to track
• Where to find information
• What change would be significant

Part 3: Decision Rules (150-200 words)

• "If [regulatory event], then [action]"

• Cover both bullish and bearish scenarios

• Be specific and actionable

• Dashboard format (boxes, sections, visual organization)

• Maximum 600 words

• Clear headers

• Suitable for printing/quick reference

• Accuracy (25%): Is the status correctly characterized?

• Completeness (25%): Are key elements covered?

• Practicality (25%): Is this usable as quick reference?

• Decision quality (25%): Are the rules sensible and actionable?

Time investment: 2 hours
Value: Creates personalized monitoring tool you'll actually use.

1. Torres Ruling Scope:

What did Judge Torres' ruling in SEC v. Ripple actually decide regarding XRP?

A) XRP is definitively not a security under any circumstances in the United States
B) Ripple's programmatic sales on exchanges were not securities offerings, but institutional direct sales were investment contracts requiring registration
C) All XRP sales by any party are exempt from securities laws
D) The SEC has no jurisdiction over any cryptocurrency transactions

Correct Answer: B
Explanation: Torres' ruling distinguished between different sales contexts. Programmatic sales (on exchanges, to anonymous buyers) weren't investment contracts because buyers had no contract with Ripple and didn't know Ripple was the seller. Institutional sales (direct, with contracts) were investment contracts. The ruling addressed Ripple's specific sales, not XRP universally. Options A, C, and D overstate the ruling's scope.

2. Administration Philosophy Shift:

What is the primary difference between the SEC's approach under Chair Gensler versus Chair Atkins?

A) Gensler believed all crypto was illegal; Atkins believes all crypto is legal
B) Gensler used "regulation by enforcement" (sue first, rules later); Atkins uses "regulation by rulemaking" (write rules, then enforce)
C) Gensler focused on investor protection; Atkins doesn't care about investors
D) There is no meaningful difference; both approach crypto the same way

Correct Answer: B
Explanation: The philosophical shift is from enforcement-first to rulemaking-first. Under Gensler, the SEC brought 100+ enforcement actions without providing comprehensive rules for compliance. Under Atkins, Project Crypto establishes frameworks through consultation, letting industry understand requirements before facing enforcement. Both chairs believe in regulation—they differ on methodology. Options A and C mischaracterize both approaches.

3. GENIUS Act:

What type of crypto asset does the GENIUS Act primarily regulate?

A) All cryptocurrencies including Bitcoin and XRP
B) Only cryptocurrencies classified as securities
C) Stablecoins—crypto assets designed to maintain stable value relative to fiat currency
D) Only decentralized finance (DeFi) protocols

Correct Answer: C
Explanation: The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) creates a federal framework specifically for stablecoins. It establishes reserve requirements, redemption rights, licensing pathways, and issuer standards for USD-backed stablecoins. It doesn't directly regulate Bitcoin, XRP, or securities tokens—those fall under different frameworks (CFTC for commodities, SEC for securities).

4. ETF Implications:

XRP ETFs now trade on US exchanges. What does this approval imply about XRP's regulatory status?

A) The SEC has formally declared XRP a commodity in an official rulemaking
B) ETF approval implies regulatory comfort with XRP as an investment asset, though it doesn't constitute formal classification
C) ETF approval means XRP is now a registered security under the Securities Act
D) ETF approval has no implications for XRP's regulatory status

Correct Answer: B
Explanation: ETF approval signals that the SEC is comfortable with XRP as an underlying asset for regulated investment products—implying it's not treating XRP as an unregistered security requiring remediation. However, ETF approval isn't the same as formal commodity classification through rulemaking. It's an implied acceptance, not an explicit declaration. Option A overstates; Option C misunderstands (ETFs hold the asset, the asset itself isn't "registered" as a security); Option D understates.

5. Ongoing Uncertainty:

Despite improvements in 2025, which of the following represents a genuine remaining uncertainty for XRP's US regulatory status?

A) Whether XRP can be legally held by US citizens
B) Whether the crypto-friendly regulatory stance survives future political changes, since much of the improvement came through executive action rather than legislation
C) Whether any US exchange will ever list XRP again
D) Whether the Torres ruling will be enforced

Correct Answer: B
Explanation: The improvements came largely through executive order, regulatory appointments, and agency discretion—all of which can change with administrations. Congress hasn't passed comprehensive legislation (CLARITY Act still pending). A future administration could appoint different regulators with different philosophies. This political/structural uncertainty is real and worth monitoring. Options A and C describe resolved issues (XRP is legal to hold; exchanges list it). Option D doesn't make sense (the ruling resolved the case).

For Next Lesson:
Lesson 3 crosses the Atlantic to examine the European Union's MiCA framework—the world's most comprehensive crypto regulation. We'll explore how MiCA classifies XRP, what requirements apply, and how Europe's approach compares to the evolving US framework.

End of Lesson 2

Total words: ~5,600
Estimated completion time: 55 minutes reading + 2 hours for deliverable